Everyone Got An Invitation But You

When it comes to decisions about the delivery and financing of healthcare, all the stakeholders (hospitals, clinics, therapists, laboratories, drug manufacturers, PBMs, insurance carriers to name just a few) are around the table but you. All are protecting their shareholder value and profit margins. 

As an astute business owner you would not allow a department, with a budget as large as your healthcare, to simply “operate” without you present and then wait till year end to see what happened, knowing there will be requests for increases for the next year. If relative value and fiscal responsibility are important, why wouldn’t you be very proactive when it comes to a program that is in your top 5 expenses? 

Since 2000, health costs have more than doubled the rate of inflation each year. Family coverage has increased from $6,438 to $16,351 in 2013. While rates can be cyclical, we have yet to see an actual employer cost decrease regardless of how good experience was the previous year. Until you decide to have input into the financing and delivery of healthcare, corporate control will remain elusive. Reactive instead of proactive is the result. Cost shifting instead of cost management. This is a prime example of learned helplessness. 

A few of the issues responsible for increased costs: 

1. Fee for service is a business model the healthcare industry has used for a century. It actually encourages “more” tests, visits, x-rays, etc. As a provider, why just order a single test when you can bill for three? “If you have a treatment that requires three CT scans and re-engineer it to 

require only one, it won’t happen because two CT scan places will lose a source of revenue,” says George Halvorson of Kaiser Permanente. Some overtreatment and prescribing is attributed to defensive medicine and the fear of being named in a suit. Some are the result of a physician owning expensive machines that need to be paid for. Some are the acquisition of “bright and shiney” new equipment and procedures that are out of the ordinary and attractive to patients. For instance, of all the prostatectomies performed, 6% were non-traditional in 2004. In 2014, the number has moved to 83% that are done with robotics. A $2 million machine that cost much more for the procedure without any evidence that it is better than the traditional methods. All are ways to increase market demand. All are a cause of increased costs. Reading the CBO reports you will find that upwards of 30% of the procedures performed are unnecessary. 2. A lack of data integration and communication creates even more problems. As a result of dysfunctional practices and lack of common data on a patient, a heart attack will have the medical plan paying for large amounts of incurred expenses and duplicative tests while the fact is there is little or no incentive for paying for its prevention. The question is not how do we afford healthcare but how do we make healthcare affordable? 3. Pharmacy continues to offer significant challenges. Prices change daily and some have risen to unreasonable levels. While that used to be the story for name brands, it is now the generic drugs that are a problem. Coupled with traditional PBMs and the incredible profits they make from prescriptions, the cost of that segment alone averages in excess of .22 of every dollar spent on corporate healthcare. 

Consumer resentment and rage: In a recent survey by Consumer Reports participants were asked about real-life medical horrors. The following charges and situation were deemed to be “outrageous”: 1. 91% said $37.50 for a single Tylenol as an inpatient. 2. 89% said a doctor who orders an MRI for his patient because he owns the machine. 3. 80% said a prescription for Hepatitis that costs $1,000 for a single pill or $84,000 to $150,000 for a course of treatment. Certainly there are thousands more examples just as outrageous but these three were specifically asked in the survey.  

“There is no such thing as a legitimate price for anything in health care,” says George Halvorson, former chairman of Kaiser Permanente. “Prices are made up depending on who the payer is.” Without a doubt Medicare is the largest single source of revenue for the majority of health providers and that gives the agency the leverage to set prices. Others bargain on prices that are to be paid based on their impact on the facility or the practitioner and that can vary greatly from area to area. 

Solutions to the problem of rising corporate healthcare costs: 

Who would doubt the urgent need to somehow manage this whole process? A major problem is the requirement that you focus on the product and services you deliver to the market and the lack of time available to get educated on all aspects of healthcare. 

It would be impossible to delve into every aspect of healthcare with the goal of negotiating services and prices. Paying attention to a strategy of accessibility, affordability and accountability can eliminate many of the most pressing issues. 

Employers certainly do not need just another vendor. A trusted partner is crucial so as to have the least disruption in the process with the most favored outcomes. 

The first thought for an employer should be about what can be done to move away from the exorbitant fee-for-service arrangement. An onsite or near-site clinic that is dedicated solely to the employer’s employees or shared with other employers is obvious. New models and efficiencies have made it possible for the smaller employers to participate in such a program at a low entry cost. The premise is simple – pay wholesale rather than retail and remove the middle men from the picture. Labs, drugs and supplies are radically reduced. Fixed price practitioners whose cost per episode actually decreases with increased visits. Work done in the clinic is not charged as a claim against the health plan and obviously reduces the claim fund expense. Other corporate expenses are included at no extra charge – preemployment exams, drug testing, DOT exams, minor Worker’s Compensation, Flu shots, first responder exams, etc. 

Thought must be given to the loss of employee productivity due to different aspects of healthcare and the requirements of the program: 1. Accessibility to basic healthcare has diminished lately because of a number of issues. Physicians have to see more and more patients because of the requirements of the Federal Government and insurance carriers and reduced payment schedules. That not only reduces the time spent with the patient but reduces the time available for appointments. Add to that the fact that the United States has a shortage of such practitioners and a solution does not appear to be in sight. It is not uncommon in some of the rural areas for there not to be a single practitioner in the entire county, requiring extended travel time for an appointment. It is not uncommon to have appointments set 30, 60 and 90 days in the future. 2. Affordability is a problem that has loomed larger in recent years with the advent of high deductibles. Families now have to make decisions on whether to cover family needs or visit a physician or purchase prescriptions. Absent compliance with treatment protocols for chronic individuals, the results can be disastrous. These are hard choices with varying consequences. We are back to the question of how to make healthcare affordable? 3. Accountability is a tricky issue when it is left up to an uninformed patient. Accountability falls on both sides when it comes to adhering to treatment regimens or oversight to make sure the treatment recommended is the best at the best price with superior outcomes. When we deal with a system that is so disjointed we are susceptible to the whims of others and their decisions based on their knowledge at the time. Treating symptoms and not the “person” is what we are relegated to. Non-compliance is another one of the most expensive issues we have to contend with in healthcare. 

Movement away from fee-for-service as much as possible is an immediate plus for any corporate initiative. This requires minimal reengineering in terms of design and the results can be immediate. Add to that component the ability to purchase goods and services at wholesale prices and the savings is even greater. 

Disease management programs are another component that goes hand in glove with the fixed fee approach and can make a significant difference. Every employer population will have between 30% and 

50% who do not have a family physician. There will also be an average of 17% who are asymptomatic (have no idea they have a health issue) and are susceptible to a large claim in the future absent any medical attention. Being able to discover this group within an employer base can offer up immediate savings as well as long term. PepsiCo had a 7 year study where they tracked their wellness program and the disease management program and discovered that wellness alone provided an .84/1 ROI while disease management was responsible for a 3.84/1 ROI. 

Again, the management of healthcare is crucial while the traditional cost shifting does nothing to manage the costs – that approach only determines who pays for them. 

A transparent PBM for pharmacy goes right to the heart of the .22 per dollar spend for drugs. There is far too much slush in the traditional approaches with the employer footing the bill. Copays and deductibles, again, are simply shifting the costs rather than managing them. Full disclosure should be required and careful attention to areas such as what the PBM claims are rebates and partially refundable to the plan. Another issue is the point spread between what they pay and what is charged to the employer. 

Finally, the thought of budgeting for known losses and insuring the unknown is one that should get serious attention. For every dollar of claim payment in an insured program the administrative costs, reserves, trend, etc. is as much as $1.30. If you know the level of claims that you have year after year, it is far less costly to budget for those known dollars rather than insure them and then to insure the unknown. With the advent of PPACA, there has been a large number of smaller employers taking advantage of this tactic with favorable results. Exposure is limited and there is an opportunity for an employer on the upside. 

Careful planning with a trusted and knowledgeable partner can provide significant opportunity to transform a traditional corporate healthcare approach into one that addresses the three strategic segments - cost effectiveness, superior outcomes and that favorably impacts corporate productivity. 

“There is only one way to avoid paying more and more for the healthcare system, and that’s for corporations to get back into the healthcare business.”  

John Shiely, CEO Briggs and Stratton Corporation  

William Bennett 

Practice Leader - Healthcare and Clinics

90 Degree Benefits

678-524-5572 

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